Do you have a project ? Buying a home, a car, financing your education, starting a business. To carry out this project, you thought about three ways : winning the lottery, robbing a bank or obtaining a loan from the latter. The first option seems quite hazardous, the second a little risky and the third, after appropriate consideration, seems more realistic. But, in a practical manner, how to convince your banker and to better your odds at obtaining this loan?
These are methods to be applied and some arguments to reach your goal.
Plan in advance!
Going to your appointment without being prepared would be like losing the game before even playing it. You’ll have to think of a few main points :
The nature of the project : Buying or renovating a house, buying a car, helping fund your study, starting a business…
The financing needed : it’s important to know the exact amount you need and potential additional expenses (for example, the cost of changing the vehicle ownership certificate, a possible check of the car…)
The term of the loan : Most of bank recommend maximum 5 years for a car loan, 3 to 4 years maximum for studies, 30 years maximum for mortgages…
The monthly repayments : allow flexibility in order to avoid penalties and late payment. As well, think about the future, you might have any new project requiring an additional loan.
Your potential contribution : even if it’s a small amount, it can positively influence the bank’s decision because it shows a serious banking habits.
Bring all the necessary information, which will facilitate timely conclusions :
Work contracts of all borrowers : it shows the type of contract (permanent or not), seniority in the firm…
The three last pay slips of all borrowers : without them, impossible for the banker to calculate accurately your repayment capacities.
Outstanding loans in different organisms
The three last bank statements
The different estimations
The last income tax form of all borrowers and TFSA
Highlight your assets!
Perhaps, you are not the richest client of your bank but you might be one of the most loyal. As well, you also may have been using other pay banking services (credit card, saving accounts, insurance products…). Highlight your « customer value » during the appointment. Always keep in mind that a bank is a commercial enterprise that’s trying to increase its client base and not to lose it.
All your saving accounts can be useful. That includes any TFSA you have opened in the past.
Capitalize on competition!
Compare, compare, compare! Do not hesitate to take appointments in different banks and ask for an accurate simulation of a loan. This step can itself prove decisive in achieving a lower interest rate that weighs heavily on the global loan cost. In fact, it is not uncommon to obtain a low-interest loan only bringing up a competing bid. In short, Use formal written arguments to better negotiate.
Incidentally, one piece of advice : do not only focus on the interest rate. Also, be sure to check the application fee, associated costs, and death and disability insurance cost to include in monthly repayments.
And don’t forget!
Don’t neglect your appearance : It is unfortunate, but in this context « clothes make the man »
Take your time : « A little impatience can ruin a major project » Confucius.
Read before signing : This point seems obvious but a loan contract is quite complex. So, even if most of contrats include the provision on right of withdrawal (7 to 14 days), you should satisfy yourself before you commit to invest.
Be wary of ads that are too attractive : today, it is pretty easy to obtain a loan in different organisms, including by telephone. A serious bank will always ask you the documents listed above to calculate a detailed financing plan and will inform you on the different costs.